NEW YORK — Fitch Ratings discovered asset performance came
in stronger for U.S. prime auto ABS while subprime auto loans reversed a
seven-month trend of rising losses.

Fitch indicated prime and subprime 60-day delinquencies came
in lower in February by 4.7 percent and 2.4 percent month-over-month,
respectively. The firm said prime annualized net losses dropped 4.8 percent
month-over-month while subprime annualized net losses declined 16.5 percent.

"For both prime and subprime auto ABS performance to exceed
expectations is typical for this time of year," Fitch analysts said. "Delinquencies
and losses are likely to fall further this month as tax refunds roll in and
consumers pay down debt."

In the prime sector, 60-day delinquencies fell to 0.41
percent in February from 0.43 percent in January, according to Fitch. This
movement represents an 11-percent drop year-over-year. Annualized net losses moved
to 0.40 percent in February from 0.42 percent in January.

Analysts noticed the February annualized net losses rate was
actually 5.3 percent higher than levels seen in February of last year, which
saw "extremely low" annualized net losses rates at that time declining even
further in the spring months, hitting a record low of 0.14 percent in June of
last year.

Fitch determined prime cumulative net losses were unchanged
at 0.29 percent in February versus January, the fourth consecutive time the
rate stayed at this level.

"The low loss frequency is in large part due to the stable
U.S. economy," analysts said. "This is evidenced in stronger home values,
rising equity prices, rising consumer sentiment and an expanding job market
which saw slightly higher job growth in recent months.

"Further, healthy used-vehicle values are containing loss
severity resulting in elevated recovery rates on defaulted and repossessed
vehicles," they added.

Fitch found that subprime 60-day delinquencies dropped to
3.65 percent in February, down from 3.74 percent in January. Subprime annualized
net losses were at 5.53 percent, improved from 6.62 percent in January.

The February level represented a 17 percent lower mark
year-over-year — the first year-over-year improvement since October of last
year.

Fitch mentioned the Manheim Used Vehicle Value Index declined
in February to 122.0 from 123.4 in January.

"Used vehicle values have come down off record levels seen
over the past two years," analysts said. "Values have normalized as used
vehicle volumes coming into the market have increased over the past two years.

"Additionally, higher incentives along with stronger new-car
sales are moving buyers away from used vehicles," they went on to say.

Fitch's auto ABS indices are comprised of $67.7 billion of
outstanding notes issued from 124 prime and subprime transactions. Of this
amount, 73 percent comprise prime auto loan ABS and the remaining 27 percent
subprime ABS.

Fitch said it upgraded six tranches of prime auto loan ABS
notes in February (consistent with 2011).

"Fitch expects more auto ABS upgrades throughout 2013,"
analysts said. "Fitch's outlook for prime auto ABS asset performance is stable,
while the ratings performance outlook remains positive for 2013."

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